It’s a good time to be in Toronto… not only are the Raptors in the NBA Finals…
But today is the first ever Petra Picks Conference which is being held at the Ritz Carlton. While the market isn’t giving us much in terms of volume and price action, it’s been a great day of education nonetheless.
( I was forced into trading in my 50s after my broker lost half of my portfolio in the financial crisis of 2008. I’ve gone on to make millions in trading profits since then. And I am ready to help you on in your journey, click here to find out more.)
It’s pretty incredible when I just sit back and think about it.
You see, I’ve always considered myself as an entrepreneur. However, I was forced into trading in my 50s after my broker lost half of my portfolio during the financial crisis of 2008.
And you know what?
You can move money very fast if you don’t have a plan and a set of strategies that work. Foolishly, I felt the more trades I had on… the better. I was clueless on how to read charts and how the markets functioned overall.
Naturally, when you put so little thought in your trading you’re going to end up losing more times than you make… and that’s what happened to me.
However, I realized that if I wanted to regain the money my broker lost me… I would need to change my mindset from gambler/risk taker to planner and chart stalker.
You see, we can’t control everything that happens in the market. However, we can control the amount of money we risk per trade. And that has helped me gain peace of mind.
(If you’re looking for someone to hold your hand, teach you about risk management, and teach you how to get base hits… then you’ll want to work with Heather and me. Click here to get started.)
These days you’ll find two post-it notes next to my keyboard.
The first one reads: Is this trade EMOTIONAL?
The second one reads: Have I planned my trade?
Read on to learn how to develop the trader’s mindset.
A lot of traders have the same problems… and it wasn’t until I learned these pitfalls and how to avoid them that I developed the trader’s mindset.
When I first started trading… I had no idea how fast you could lose money… and of course, I thought more trades were better. I wanted to be all in, all the time. I just wanted to throw trades on because that’s what I thought would maximize my returns.
However, that’s not the case.
You see, that’s actually what we call overtrading. In other words, you’re simply entering into trades without any rhyme or reason… ultimately, this could lead to large losses… and commissions will eat at your account.
After losing a lot of money in the markets, I had a realization that there was more to trading than just pressing the buy or sell button… I needed to learn as much as I could about the markets – things that fit my personality and style.
So how did I go from a trader who just gambled to a calculated, risk-averse trader?
First, I got my head on straight… and figured out my goals and how to develop a trading plan.
Get Your Head on Straight and Have A Plan
For starters, I knew I needed to develop a plan. You see, I started to treat trading like a business. Naturally, I was an entrepreneur, so I knew what it took to develop a plan… I just needed to put it into trading terms.
For starters, I knew I needed to start to put more thought into my trades. Previously, I was just buying stocks without a real reason. However, I realized it’s pretty much like a business.
For example, I was a horse trader, if you will. I bought and imported horses… and I knew where my pain points were. I would need to put at a specific price… have a price where I wanted to take profits… and a price where I’d cut my losses if there wasn’t any demand.
Well, that’s pretty similar to trading right?
You have a place where you’d want to buy, a risk limit you’re comfortable with (the amount you’re willing to lose on a trade), and a target area.
That’s the barebones for a stock-specific trading plan right there.
However, it’s hard to figure out where you should buy a stock, take profits and stop out with stocks… but there’s something called charting.
When I first learned about charting, I thought to myself, wow… that’s really simple to do, you see a signal… and right there you know where you want to get in, stop out, and take profits.
That said, I diligently studied charts
That’s when I became a chart stalker… looking for just a few patterns out there because I figured those were going to be my money makers.
Now, I’ve boiled down my trading into just a simple table (after I analyze the charts).
Now, I actually send my watchlists, as well as my trading plans to my clients… making it simple for them because we have clear buy zones, profit targets, and stop losses.
It’s not about just having a plan… it’s also about executing and sticking to it.
You see, I’m in total control of my risk… and the plan allows me to stick to my risk parameters, otherwise… I’d be trading off my emotions. Not only that… I have two things right in front of me on my keyboard to remind me to stick to my plan.
One note I have handwritten is: “Is this trade emotional?”
The second note is: “Have I planned my trade?”
That said, having a plan has been integral to my trading success… and allowed me to become a trader who gambled to one who’s calm and calculated.
How am I able to do that?
Well, I focus on just a few chart patterns… when I do that, I don’t have the need to be glued to my screens all day.
All I have to do is wait for a signal and look at the market… if the conditions are right, I’ll take action. However, if the market is extremely volatile, I’ll take a step back because I know that’s when I could lose money.
For example, one of the setups I look for is the pinball.
Pinball Pattern Basics
With the pinball pattern, I have a specific list of rules I follow when I think the pattern is forming.
___1. The trend must be in a definable downtrend, 8 EMA is below or equal to the 20 SMA, 20 SMA is below the 34 EMA, 34 EMA is below the 50 SMA, and 50 SMA is below the 200 SMA.
___2. Some form of a bottom forming. Some examples include, but are not limited to. double bottom, lower high, higher low, higher high, multi-bar candlestick bottom.
___3. There should be 10% or more from the 8 EMA to the 34 EMA.
___4. Yesterday’s close must be above 8 EMA.
___5. Buy on positive trading above the 8 EMA after yesterday’s close above the 8 EMA.
___6. Take profits on at least half of the position at the 34 EMA on the daily chart, or 200 SMA on the 60 minute chart, whichever comes first.
___7. Use a stop on a close below the 8 EMA.
Now, if you don’t know what any of these terms mean, make sure to check out my 10 Must-Have Trading Tips.
For example, I’ll scan for stocks exhibiting these patterns… and monitor them. For example, here’s a look at INFN (a stock I think that could form the pinball pattern).
What I’m looking at here is a bottom potentially forming… there’s at least 10% between the 8 exponential moving average (EMA) to the 34 EMA.
Right now I’m looking for a close above the 8 EMA… and I’ll continue to monitor that.
You see, with the checklist and a trading plan, I have blinders on… allowing me to focus on the markets – helping me to develop the trader’s mindset.
That said, if you want to learn more about what it takes to develop the trader’s mindset and have success in trade… check out my 10 Must-Have Trading Tips.